How to trade momentum teach me from scratch and what are the best indicators for that and how to use them

Trading Momentum from Scratch: Here's a step-by-step guide to trading momentum:

1. Understand Momentum Trading: Momentum trading is the practice of buying and selling assets based on the strength of recent price trends. It's about capitalizing on the expectation that a strong trend will continue.
2. Identify Strong Trends: Look for assets with significant price movements over a short period. High volume can indicate strong trends.
3. Choose Momentum Indicators: Common momentum indicators include Relative Strength Index (RSI), Moving Average Convergence Divergence (MACD), and moving averages. RSI measures overbought or oversold conditions, MACD shows momentum shifts, and moving averages help smooth out price trends.
4. Use RSI for Confirmation: RSI is particularly useful for confirming trades based on price actions like breakouts or pullbacks. A high RSI can indicate overbought conditions, suggesting a potential reversal, while a low RSI may signal oversold conditions, hinting at a potential trend reversal.
5. Consider Volume: High volume during a trend can indicate strong momentum and the potential for continued price movement.
6. Set Entry and Exit Points: Determine your entry point when momentum is in your favor and exit when momentum starts to weaken. Use momentum indicators to confirm these points.
7. Practice Risk Management: Set stop-loss orders to limit potential losses and determine your risk-reward ratio before entering a trade.
8. Stay Updated: Keep an eye on market news and events that could impact momentum.

Best Indicators for Momentum Trading:

1. RSI: RSI is a versatile indicator that helps identify overbought and oversold conditions, which can signal potential reversals.
2. MACD: MACD shows momentum shifts and can be used to identify trend reversals or continuations.
3. Moving Averages: Simple moving averages or exponential moving averages can smooth out price trends and help identify support and resistance levels.

How to Use Momentum Indicators:

1. RSI: RSI values range from 0 to 100. Typically, an RSI above 70 suggests overbought conditions, while below 30 indicates oversold conditions. Use crossovers or divergence from price action to confirm trades.
2. MACD: MACD consists of a line representing the momentum and a signal line. Divergence between the two can signal trend reversals or continuations. Use crossovers of the MACD line and the signal line for trade signals.
3. Moving Averages: Moving averages help smooth out price trends. A stock trading above its moving average is considered in an uptrend, while trading below it suggests a downtrend. Use moving averages to identify support and resistance levels.

Remember, momentum trading involves risks, and past performance is not indicative of future results.